Following the drive to raise local funds to finance the N6.26 trillion 2022 budget deficit, the Federal Government has borrowed a total of N984.28 billion through FGN bonds between January and April 2022, FGN bond auction result released by the Debt Management Office (DMO) has revealed.
FGN bonds are debt securities/ liabilities of the Federal Government of Nigeria (FGN) issued by the debt office on behalf of the Federal Government. The FGN has an obligation to pay the bondholder the principal and agreed interest as and when due.
The 2022 budget has a deficit of N6.26 trillion, forcing the Federal Government to issue new borrowings of N5.012 trillion (of which domestic – N2.506 trillion and foreign – N2.506 trillion); drawdowns on Project-tied Multilateral/Bilateral loans – N1.156 trillion; and Privatisation Proceeds of N90.73 billion.
With the added new debts to the debt stock, it is expected that the country’s total debt stock going is to hit N45.86 trillion by December 2022. The N984.28billion raised by DMO from local investors represents an increase of 43.66 per cent compared to N685.16 billion FGN bond raised in first four months of 2021.
The appetite for FGN bonds indicates that Pension Funds Administrators (PFAs), and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment. The FGN Bond auction result issued by DMO revealed that the total amount offered between January and April 2022 increased to N675billion as against N600 billion offered between January and April 2021.
The DMO’s FGN bond auction result, showed that the N225 billion offered in April 2022 is the highest so far this year. The raised amount in April was N219.88billion. The DMO in the first three months of 2022 offered N150 billion, while amount raised eventually was N764.4billion, attributable to investors’ oversubscription. The FGN bonds issued by DMO in the first four months of 2022 have recorded oversubscription despite mixed interest rates.
A total of N1.3 trillion oversubscription was reported by the DMO in the four months under review. Monthly breakdown revealed that FG bond issuance for the month of January 2021 by the DMO recorded an oversubscription of N175.24 billion to stand at N170.64 billion despite only seeking to raise N150 billion in its 20-year bond issuance.
DMO issued two tranches of bonds in its first issuance for the year, reopening its 12.50 per cent FGN Jan 2026 bond and issuing a new 13.00% FGN Jan 2042, which is set to mature by 2042. The breakdown of the report by DMO revealed that the first tranche was oversubscribed by N36.19 billion with subscriptions of N111.19 billion, surpassing the offered amount of N75 billion, while the second tranche was oversubscribed by N139.05 billion over the N75 billion offered amount.
However, in February, the FGN bond issuance by the DMO recorded an oversubscription of N407.72 billion over the intended N150 billion. The bond issuance was auctioned in two tranches with 12.5% FGN Jan 2026 bond programme seeking to raise N75 billion, which gathered a total subscription book of N325.40 billion across 230 bids with a marginal rate of 10.95per cent. The second bond programme, the 13% FGN Jan 2042 bond raised a total subscription of N232.32 billion across 151 bids, representing a N157.32 billion oversubscription on the offered amount of N75 billion with a marginal rate of 13per cent.
For March, FGN bond issuance recorded an oversubscription of N448.42 billion over the intended N150 billion offered by the DMO.